Trump signed an executive order Monday, promising aggressive action by his administration if the U.S. isn’t offered “Most Favored Nation” (MFN) status in purchasing pharmaceuticals overseas. MFN means that any trade advantage, concession or privilege granted by one country to another must be extended to all other countries that are members of the World Trade Organization (WTO).
If drug companies don’t comply, certain drugs could face modified or revoked approval for their products in the U.S.
Is that socialism?
“It has that flavor, that tone to it, of being a little heavy-handed from the executive branch,” Dr. Mary Talley Bowden, founder of the political action committee Americans for Health Freedom, replied on American Family Radio Tuesday.
Trump says his goal is that Americans pay the same lower prices that citizens from many other nations are paying. Most Favored Nation status could help the U.S. get there.
MFN status sounds great, but there are challenges, write Drs. Darius Lakdawalla and Dana Goldman of the University of Southern California’s Schaeffer Institute for Public Policy and Government Service. They describe three:
It’s not hard to take advantage of the system: Rather than drive U.S. prices lower, drug companies and their overseas customers could create the appearance of higher prices overseas by agreeing to confidential rebates. It’s already common overseas.
Should the U.S. seek to compel drug companies to disclose their rebates, they could run up against foreign laws requiring confidentiality.
It can’t undo the basic economics of the global drug marketplace: Schaeffer Center research shows that 70% of global pharmaceutical profits flow from the U.S.
Facing a choice between deep cuts in their U.S. pricing or the loss of weakly profitable overseas markets, we can expect many firms to pull out from overseas markets at their earliest opportunity, leaving U.S. consumers with the same prices, pharmaceutical manufacturers with lower profits, and future generations with less innovation. "In sum, everyone loses," write Lakdawalla and Goldman.
It cedes pricing decisions to foreign governments: Not all Western nations value new medicines in the same way the U.S. does.
For example, the British National Health Service has long considered health improvements to be as low as one-third the value of even conservative American valuations.
And other developed countries have shown ample willingness to simply deny access to all their consumers if they are offered a price they think fails to represent value, according to their artificially low conceptions of it, the doctors write.
This is Trump’s second go-round with price controls in the drug world.
In 2020 during his first term, he signed an executive order that would have tied Medicare Part B drug prices to Most Favored Nation status, but the plan was blocked by the courts.
The system is definitely broken, but Trump’s plan is vague and undefined, Bowden told show host Jenna Ellis.
Bowden suggests three other ways to lower prices at home: address the kickback problem for third-party pharmacy benefits managers (PBMs), find new “off-label” uses for approved drugs, and increase drug production in the U.S.
PBMs serve as intermediaries between insurance companies, pharmacies and drug manufacturers. They manage prescription drug benefits, a task that includes negotiating prices with manufacturers and pharmacies.
“PBMs basically get kickbacks for allowing patients to get certain medications. That drives up the prices of drugs,” Bowden said.
She calls it a “major problem” in the U.S.
“I was excited because I thought [Trump’s EO] was going to address this in our system, but it doesn’t look like it’s going to,” she added.
Getting creative with 'off-label' uses
A number of FDA-approved drugs already have “off-label” uses. Quetiapine is approved for schizophrenia but also used for insomnia; Tramadol is approved as an antidepressant but also used for restless leg syndrome. Those are just two examples.
Ivermectin, used primarily to treat parasitic infections in animals, became a household word for its use to treat humans during the COVID-19 pandemic, a treatment not endorsed by the FDA.
“I'm involved in a lawsuit against the FDA right now where a pharmaceutical company is suing because they have a medication that works very well for an off-label indication," Bowden shared. "We saw this during COVID where we had these medications that had great off-label uses, but that off-label use was suppressed.
“If we have existing medications that can be used in off-label ways, that drives down price.”
Increasing prescription drug manufacturing in the U.S. may be a more complex problem. Research by PharmacyChekcer.com has shown that 70% of the top-selling brand name drugs are produced overseas. Among a handful of nations, the European Union leads the way in brand-name drug production at 30%.
Eighty percent of generic drugs are produced overseas with 40% in Indian, 20% in China and 20% in a handful of other nations including Japan and Singapore.
Relying on overseas production for drugs Americans rely on creates concerns for not only price but quality control, Bowden concluded.
